THE GLOBAL CONTEXT FOR U.S. TECHNOLOGY POLICY TABLE OF CONTENTS Page Policy Context................................................................................................................... 1 Focus on Economic Growth ........................................................................................... 4 Changes in Relative U.S. Position ................................................................................ 5 Evolution of Global Technology Policy ...................................................................... 6 Shifting Focus of U.S. Industrial R&D........................................................................ 8 Conclusions.....................................................................................................................10 References ....................................................................................................................... 11 Figures 1 Evolution of U.S. Technology Policy................................................................................................. 1 2 U.S. Companies Lead in World Class Drugs ................................................................................... 2 3 U.S. Leads in Gene Engineering Patents, 1992 ................................................................................ 2 4 U.S. Chemical Industry Dominant in the Global Marketplace ..................................................... 3 5 U.S. Closing the Gap in Automotive Productivity ......................................................................... 3 6 U.S. Closing the Gap in Automotive Quality .................................................................................. 3 7 Framework for U.S. Technology Policy ............................................................................................ 4 8 GATT/WTO Membership on the Rise, 1947-1997 .......................................................................... 4 9 U.S. Share of World GDP, 1950-1992 ................................................................................................. 5 10 U.S. Share of G-7, OECD, and World R&D Funding as a Percentage of GDP, 1950-1994......... 5 11 Technology Policies in Developing Nations .................................................................................... 6 12 Total National R&D Spending as a Percentage of GDP Compared to GDP per Capita, 1996 . 6 13 U.S. Sources of R&D Funding as a Percentage of GDP, 1950-1996............................................... 7 14 Industry R&D Intensity as Measured by Percentage of R&D to Sales, 1977-1994 ..................... 8 15 Selected Industries’ Share of Total Industry R&D Expenditures.................................................. 8 16 Information/Electronics, Drugs/Medicines Approximate Share of Total U.S. R&D ................ 9 17 Sectors’ Percentage Shares of Total Industry R&D Spending and Net Sales, 1981-1995........... 9 The Global Context for U.S. Technology Policy Graham R. Mitchell Assistant Secretary of Commerce for Technology Policy U.S. Department of Commerce Policy Context In the 25 years following World War II, the United States enjoyed global competitive and techno- logical dominance. Many of the most important technical breakthroughs occurred in the United States. U.S. companies, lacking strong competitive challenges from abroad, had both the time and resources to follow many of these scientific and technological advances from fundamental discoveries to com- mercialization. During this post-war period, the Federal government’s technology policy and its investments in science and technology were largely in support of basic research and various government missions. The government made especially large investments in defense and space-related research and devel- opment in response to the Cold War and Race in Space against the Soviet Union. With respect to commercial technology, the Federal government’s relationship with the private sec- tor was one of spin-off; that is, technology first developed for government missions eventually made its way to the private sector for commercial application. The slow pace and uncertainty of the spin-off process was of little concern, since U.S. firms were uniquely positioned to take advantage of the technol- ogy and research results flowing from the Federal government’s laboratories and from university-based research. From this base of government research and development arose America’s global leadership in computers and electronics, satellite communications, aerospace, and later in pharmaceuticals. 1 The competitive challenges of the 1970s and 1980s transformed the global technology landscape [Figure 1]. Sole U.S. dominance gave Evolution of U.S. Technology Policy way to competitive leadership shared by a triad consisting of the United States, WWII 1970 1990 2010 Europe, and Japan. The Europeans and Dominant World Cold War Policy Global Economic Japanese had developed significant Growth technological capabilities, and their World Competitive U.S. Dominant Triadic Global companies were capable of exploiting Situation (Relative (U.S. Resurgence?) U.S. Decline) not only their own domestic science and U.S. Government technology resources, but those of the Technology Policy United States as well. This raised sig- Mission • Defense Spin-Off • Space (Slow Comm- nificant concerns when the Japanese • Energy ercialization) • Health came to dominate markets for technolo- • Basic Research 1980--University/Government/ gies that had been pioneered in the Civilian Industry Partnerships United States, including televisions, ste- Competitiveness (Faster Commercialization) reos, the video cassette recorder, ma- Figure 1 chine tools, and robots. 2 The Global Context for U.S. Technology Policy Moreover, other countries had learned to commercialize technology quickly, with a number of foreign companies adopting time-based competitive strategies and more flexible manufacturing sys- tems to thrive in an era of ever shortening technology development and product life cycles. For example, during the 1980s, Ford took nearly ten years to redesign the Escort; Honda redesigned the comparable Civic four times in the same period. In another example, Xerox found that its Japanese competitors could develop a new copier in half the time it took Xerox to do it. Many foreign companies had also implemented new quality improvement and production man- agement methods that enabled them to compete against U.S. producers with products of superior quality at lower cost. As a result, several U.S. industries lost significant global market shares. In a response to these competitive challenges to the United States, particularly in high-technology markets, Federal technology policies were established to encourage a fuller and faster exploitation of publicly-supported R&D by American firms. This involved efforts to create partnerships between government-funded creators of technology, principally government laboratories and universities, and U.S. industry to speed the development and commercialization of new technology. We fully expect that the need for such partnerships will continue as competitive pressures increase and further accel- erate technology and product life cycles. 2 By the mid-1990s, this triadic portrayal has given way to an increasingly global economy with a range of rapidly growing nations that are powerful new competitors and, at the same time, represent the prospect of large emerging markets. Many of these countries seek to join the ranks of the world’s technological leaders, and several are rapidly developing world-class technical and manufacturing capabilities. 3 Nevertheless, studies show that the competitive position of several U.S. industries is stronger than generally assumed in the 1980s and is improving with the introduction of new technology and the continued expansion and evolution of the global market. The role that Federal technology programs and policy initiatives have played in promoting U.S. competitiveness varies significantly by sector. For example, in biotechnology, U.S. industry is com- petitively dominant. This position is illustrated not only by market data, but by U.S. commercial leadership in the production of world class drugs [Figure 2]. This, in turn, is based on U.S. dominance in the underlying science as illustrated by the U.S. position in genetic engineering patents, and by the number of foreign corporations buying or setting up R&D capacity in the United States in order to tap American expertise in the field [Figure 3]. This industry provides the clearest example of direct benefit and competitive dominance as a result of public investment in research through NIH and other government agencies. 1, 4 U.S. Companies U.S. Leads in Lead in World Class Drugs Gene Engineering Patents U.S. 1992 Japan Japan (16) U.K. Germany Switzerland Other (18) France Sweden U.S. (140) Italy European 0 20406080100120 Community Number of World Class Drugs (14) Figure 2 Figure 3 The Global Context for U.S. Technology Policy 3 The U.S. chemical industry is glo- bally competitive [Figure 4]. In contrast U.S. Chemical Industry Leads to the biotechnology sector, it has gained in the Global Marketplace little from direct R&D programs with 1993 government agencies. However, it has 350 benefitted enormously from public in- 300 Output vestments that have fostered a strong 250 Exports academic research base from which the 200 industry draws qualified personnel. As 150 $ Billions much of the industry’s future growth is 100 expected to occur in